]]>In conjunction with IMF-World Bank spring meetings, the second annual Global Finance Forum will feature remarks and armchair chats with leading U.S. and European policymakers. The two-hour event, being held on Thursday, April 19 in Washington, D.C., will highlight a range of timely global economic and financial issues, including prospects for growth, Brexit, cross border regulation and tax policy, and more.

Register today to gain insight into how international policymakers can facilitate growth in local economies through robust and smartly regulated capital markets.

]]>In a Wall Street Journal op-ed (“Why Illinois Got Out of the Hedges,” op-ed, Feb. 1), Marc Levine criticizes the hedge fund industry, asserting that its “strategies seem better suited to generating publicity than great returns.” While I respect Mr. Levine’s opinion and his dissatisfaction with the Illinois State Board’s portfolio, many of his pension investor colleagues seem pleased with how hedge funds help them better meet the needs of the workers, retirees, and taxpayers who rely on their success. Hedge funds improve portfolio performance and diversify risk, important reasons why 72 percent of investors recently reported that their portfolios met or exceeded expectations in 2017, according to a new report from independent data provider Preqin.

While hedge funds may not fit into everyone’s portfolio, they continue to be an important tool for keeping the retirement income promises made to America’s workers. The firms that I represent participate in one of the world’s most intensely competitive industries, work hard to achieve the complex objectives of our clients and, we believe, have largely succeeded.

Investment firms and financial institutions across the world are working overtime to satisfy the requirements of the Markets in Financial Instruments Directive II (MiFID II) and develop solutions to unexpected implementation issues.

As the President and CEO of Managed Funds Association I can assure you that the hedge funds and managed futures funds who make up our Membership are no different.

Our Members appreciate the understanding and patience of European policymakers as the industry undertakes this massive effort.

Still, as is to be expected, implementation has brought some challenges, just as the implementation of complex regulations has brought challenges in the United States. We are committed to working with the appropriate policymakers to seek solutions that strengthen our ties with Europe.

One area where policymakers could facilitate the objectives of MiFID II and enhance transparency and the accuracy of data reported to regulators is transaction reporting and trade reporting.

For instance, requiring both parties to a transaction to provide their Legal Entity Identifier number to their counterpart in conjunction with a transaction will help ensure consistent and accurate transaction reports. Regulators could also further increase transparency by making public an official and granular list at the EU level of systematic internalisers – a new term for a trading facility that executes client orders using proprietary capital. Without an official list of systematic internalisers for each product, market participants are more likely to under- or over-report trades to regulators.

The implementation of MiFID II is emblematic of an effort to modernize European capital markets. Across the EU, countries are working to remove longstanding impediments to investment to enhance economic growth.

To put even more capital to work for Europe’s economies, MFA believes policymakers should keep intact regulations that work well, fine-tune those that do not, and ensure new ones recognize the unique nature of investment management firms.

There are a number of policies currently under consideration that could impact Europe’s ability to strengthen its markets and tap into alternative pools of capital.

A Capital Markets Union, for one, has the potential to encourage the efficient and effective allocation of capital, but we believe the final product must put all market participants on level footing and foster sources of capital that complement bank lending. This is particularly important for small- and medium-sized businesses, many of which depend on non-bank financing to fund their operations and growth.

Ensuring the free flow of capital across EU member states and eliminating the patchwork of regulations and restrictions would attract additional capital and market participants.

MFA also understands the European Commission’s development of a Prudential Regime tailored for investment firms. We do not believe that regime should use assets under management as a metric for determining the level of risk posed by an alternative manager. Because hedge funds are not systemic, we strongly encourage a cap on capital equal to the size of caps in established regulations.

The ongoing European Supervisory Authorities Review is also of great interest to our Members. MFA is concerned that any significant changes to the ability of EU investment managers to outsource or delegate the management of certain funds could deny European investors access to investment experts in New York, London, Hong Kong, or Sao Paolo. The existing delegation model has been in place for decades and our Members see no reason for it to change.

In addition to advocating for these policy priorities, MFA has worked tirelessly to ensure Members maintain access to European markets and European investors get the benefit of our Members’ expertise during the Brexit transition period.

Our Members are aware of the vast opportunities Europe offers. That is why so many of them already operate here – for example, our Members help European pension funds by providing stable returns over time and reducing risk and volatility in their portfolios.

MFA will continue offering reasonable suggestions to streamline and simplify regulations and legislation and give analysis and feedback to help policymakers ensure fair, transparent, and efficient markets.

That is the charge given to us by our Members and the investors they serve.

]]>Preqin today released its 2018 Global Hedge Fund Report, which provides fresh insight into the industry. According to the study, 72 percent of investors reported that their portfolios met or exceeded expectations in 2017. The strong performance prompted investors to allocate additional capital to the industry. In fact, Preqin reports that in 2017 hedge funds received net inflows of $49 billion in new capital, pushing the industry’s assets under management to a record high of $3.55 trillion.

MFA President and CEO Richard H. Baker said: “2017 showed how funds continue to adapt to changing conditions, identify new opportunities and find innovative new markets to explore. 2018 holds even more potential. MFA Members continue to seek value for their investors in a variety of ways, such as deploying new quantitative strategies or taking advantage of the latest developments in machine learning.” See below to read Mr. Baker’s full commentary.

2017 was another consequential year for the alternative investment industry.

According to independent estimates, industry assets under management reached record levels in 2017. We have every reason to believe that 2018 will be even better.

Large institutional investors like pension funds, charitable endowments and universities turned to alternative strategies again in 2017, continuing the trend from previous years. That trend shows no signs of changing.

Preqin’s data bears this out. Two-thirds of investors surveyed in December 2017 plan to maintain or increase their allocations to hedge funds in 2018. Looking further into the future, three-quarters of investors also expect to maintain or increase those allocations over the next decade.

This represents real and growing confidence in our industry – confidence we believe is well deserved given a range of factors.

Many market participants believe rising interest rates and other macroeconomic factors will offer increasing opportunities for alpha in the coming years.

In addition to helping investors deliver reliable returns over time, our Members help institutions and others manage risk in their portfolios. Given the stakes involved, pension funds, colleges and charitable endowments understand better than most the need to limit their potential exposure in the event of a downturn or market adjustment.

As one institutional investor told us recently: “We do not want to be entirely dependent upon the outcome of the stock market, so we need some diversifying strategies.”

2017 was also not without its challenges. Among other issues, our industry continues to grapple with regulatory and political uncertainty in the U.S. and abroad. In addition, the industry’s contributions to the economy and its value to investors continue to be misunderstood by many. Improving the industry’s perception among key stakeholders is a top priority for MFA.

Despite those headwinds, 2017 showed how funds continue to adapt to changing conditions, identify new opportunities and find innovative new markets to explore. 2018 holds even more potential. MFA Members continue to seek value for their investors in a variety of ways, such as deploying new quantitative strategies or taking advantage of the latest developments in machine learning. And the rise of cryptocurrencies is a source of constant discussion among our Members and investors as they determine what role, if any, they should play in their portfolios.

As the authoritative voice of the global investment industry, MFA was at the forefront of many of the critical conversations impacting our industry in 2017. MFA Members and staff continue to advocate for fair, efficient and transparent capital markets. We work tirelessly on the issues that matter to our Members and their investors, including the protection of confidential proprietary information provided to regulators.

I am proud to work on behalf of an industry that seeks out and rewards entrepreneurship and innovation. I am proud to work on behalf of an industry that helps protect the retirement security of teachers, firefighters, police officers and others that serve our communities. And I am proud to work on behalf of an industry that plays a critical role in stimulating growth that benefits our entire economy.

]]>The third video in MFA’s #HedgeFundamentals Institutional Investor video series features Ken Miller, State Treasurer of Oklahoma. In this video, Mr. Miller discusses how his state uses hedge funds to diversify its investment portfolios.

]]>On Thursday, MFA submitted to CFTC Chairman Giancarlo and European Commission (EC) Vice President Dombrovskis a cover letter and comparative analysis of certain key topics under the U.S. and EU OTC derivatives trading and transparency regimes in connection with the joint announcement on October 13, 2017, of an agreed common approach between the CFTC and the EC on certain derivatives trading venues. MFA’s analysis offers constructive recommendations for further convergence in certain areas.

]]>#HedgeFundamentals: Joel Hinkhouse of the Teacher Retirement System of Texashttps://www.managedfunds.org/2017/09/hedgefundamentals-joel-hinkhouse-teacher-retirement-system-texas/
Wed, 20 Sep 2017 14:39:32 +0000http://www.managedfunds.org/?p=41446The second video in MFA’s #HedgeFundamentals Institutional Investor video series features Joel Hinkhouse of the Teacher Retirement System of Texas […]

]]>The second video in MFA’s #HedgeFundamentals Institutional Investor video series features Joel Hinkhouse of the Teacher Retirement System of Texas (TRS). Learn more about how TRS, a $133 billion retirement trust, uses hedge funds in its portfolio to help provide secure retirements for 1.4 million teachers and retired teachers in the State of Texas.

]]>Managed Funds Association launched an updated Institutional Investor Map and a new video series featuring institutional investment officers explaining, in their own words, the important role hedge funds play in their institutions’ larger portfolios.

The first video lets you hear directly from Steve Algert, Managing Director and Assistant Treasurer at the J. Paul Getty Trust, about how he uses hedge funds to help dampen market volatility.

The Institutional Investor Map, using data from Preqin, highlights how leading institutions in every state use hedge funds to diversify their investment portfolios, manage risk and meet their financial obligations.

The map will be updated regularly and in the coming weeks, additional videos featuring a senior investment manager at the Teacher Retirement System of Texas and the Oklahoma State Treasurer will be released.

The Institutional Investor Map and video series, along with other educational content, is available at HedgeFundamentals.org.

]]>On July 7, ESMA issued an updated set of Q&As, providing responses to questions posed by the general public and market participants on market structure issues under the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). Among other findings, MFA was pleased that one of the Q&As addresses key barriers to non-discriminatory access to EU trading venues (see: pages 29-31). MFA believes ESMA’s recommendations will help improve transparency, increase liquidity, promote competition and provide greater access to trading platforms for many market participants.

This smart regulatory development clarifies that ESMA would consider the several types of arrangements on multilateral trading facilities (MTFs), organized trading facilities (OTFs) and regulated markets as non-objective and discriminatory for purposes of access to such trading venues, including:

Any requirement for members or participants to be direct clearing members of a CCP

Any requirement for members or participants to become enabled to trade centrally cleared financial instruments with other members or participants

Any requirement for minimum trading activity to become a member or participant of a trading venue

Any imposition of restrictions on the number of participants with whom a participant can interact on the trading venue

MFA has repeatedly advocated for ESMA to prohibit such arrangements that function as implicit and explicit barriers to access for many market participants and will continue to do so as needed.